Gazprom, Europe Sing Harmony on Energy Security

December 5, 2012

_editor__T6X9205.jpgHere, Gazprom is undoubtedly the leading contender. Under the leadership of Dmitry Medvedev, Chairman of Gazprom’s Board of Directors and First Deputy Prime Minister of RF, who in December was declared Putin’s official successor, Gazprom became the company of choice for nearly 44 percent of the 1,600 Russians interviewed by the All Russia Public Opinion Research Center.

The rapid growth of the Russian gas monopoly, which in December boasted a $300 billion capitalization, has propelled Gazprom to the top tier of anybody’s list of the world’s wealthiest companies. It is now nipping at the heels of such transnational giants as Microsoft, ExxonMobil and General Electric. And it is not out of the question that Gazprom might actually overtake some of its rivals. How so? Like any other company, Russia’s state-owned gas monopoly is pragmatically seeking out all opportunities to maximize its profits in a competitive market. It is no longer in the mood to satisfy the demands of ex-Soviet partner states for subsidized gas supply.

“Today and in the nearest future Europe remains our main export market, just as it was in the past,” another Medvedev in Gazprom’s leadership told an elite audience at last autumn’s “Russian Gas 2007” forum held annually at Gazprom headquarters in southern Moscow. Expanding on his point, Alexander Medvedev, Deputy Chairman of Gazprom’s Management Committee and no relation to likely presidential successor Dmitry Medvedev, continued:  “Today, Europe is the center of our economic interests. Our interests are interdependent since Europe cannot do without Russian gas, just as Russia cannot do without European customers.” Last year, Gazprom celebrated 40 years of supplying gas to the Czech Republic and Slovakia, and next year the company will celebrate the same anniversary marking the start of gas supplies to Western Europe.

And Gazprom didn’t wait too long after the New Year to launch yet more pipeline projects to keep European supplies flowing. With the German-Russian North European Gas Pipeline (North Stream) now crossing the Baltic seabed on its way to Germany, Gazprom in January announced new initiatives to guarantee supply to southern Europe.

Italy’s Eni which laid Gazprom’s Blue Stream pipeline across the Black Sea to Turkey, will now undertake an east-west crossing from Russian shores on the Black Sea to Bulgaria. After traversing Bulgaria, this South Stream will snake in two directions via Serbia and Greece – to Vienna where it would connect into Gazprom’s existing hub outside of Vienna, or to Italy. A final decision will be made after various feasibility studies are completed. Recently Gazprom purchased 51 percent of Serbian national oil company, NIS Serbia, and intends to build a 400-km part of South Stream with 10 bcm per year through capacity and capitalize the Banatsky Dvor underground storage facility.

The message from Gazprom as 2007 rolled into 2008 was in sharp contrast to what it was the last two winters when it took steps to rid itself of arrangements to supply gas at below market prices to former Soviet states, particularly Ukraine (in 2006) and